Mackay Chapman December 2025 APRA Update
In this month’s APRA update:
- APRA introduces limits on high debt-to-income home loans to curb riskier lending
- Additional licence conditions on Australian Ethical Superannuation
- APRA refines proposed changes to capital framework for longevity products
- The System Risk Outlook Report (first edition) is now published
Keep reading for more information and key details.
APRA introduces limits on high debt-to-income home loans to curb riskier lending
APRA will introduce a 20% cap on new mortgage lending with a debt-to-income (DTI) ratio of six or more, effective 1 February 2026, as a pre-emptive macroprudential measure to contain emerging housing-related risks.
The new cap applies separately to owner-occupier and investor lending. It is not currently binding, but will operate as a guardrail should volumes rise.
Exclusions include bridging loans and loans for new dwelling construction, and proportional adjustments will apply for smaller ADIs.
APRA’s other tools (like the 3% serviceability buffer and 1% counter-cyclical capital buffer) remain unchanged.
Additional licence conditions on Australian Ethical Superannuation
APRA has imposed new licence conditions on Australian Ethical Superannuation (AES) after identifying deficiencies in its related-party expenditure management, particularly fees paid to its parent entity, Australian Ethical Investments.
APRA’s review found AES had insufficient processes to demonstrate that outsourcing and fee arrangements were consistent with members’ best financial interests.
Under the conditions, AES must appoint an independent third party to review expenditure and outsourcing practices and implement all recommended improvements.
APRA also expects strengthened governance, conflict management, and expenditure oversight
APRA Deputy Chair Margaret Cole said trustees must be able to justify related-party spending with robust evidence, and the regulator will use its full powers where governance practices fall short.
APRA refines proposed changes to capital framework for longevity products
APRA has released a second round of consultation on updates to the life insurance capital framework for longevity products, including annuities.
Following mid-2025 industry feedback, APRA has shifted to a more principles-based approach to determining capital requirements. The regulator is focused on enabling competitive pricing and greater availability of longevity products
These refinements are part of APRA’s broader goal of promoting financial system stability efficiently, without constraining product development.
Industry feedback on draft standards is open until 17 December 2025.
The System Risk Outlook Report (first edition) is now published
APRA has released the first edition of its new System Risk Outlook, a twice-yearly publication outlining its assessment of risks and vulnerabilities across the financial system.
Key insights:
- International geopolitical and economic risks are elevated, and APRA warns institutions must be prepared for a wide range of scenarios.
- Domestic housing risks are rising, including increasingly high-DTI lending by investors.
- Interconnectedness across financial sectors heightens the potential for shocks to cascade system-wide.
The report also summarises findings from Phase 1 of APRA’s inaugural system risk stress test, conducted with major banks and super funds.
The exercise suggests super funds generally stabilise the system during stress, but, in some scenarios, may inadvertently amplify negative impacts on members.
Phase 2 of the stress test will commence shortly, with a final report expected in mid-2026.
The contents of this article and any linked articles do not constitute legal advice, are not intended to be a substitute for legal advice, and should not be relied upon as such. They are designed and intended as general information in summary form, current at publication, for general informational purposes only. You should seek legal or other professional advice concerning any particular legal matters you or your organisation may have.
